According to CLSA, margin is unlikely to improve further with BS6 costs around the corner.
JPMorgan has an underweight call on the stock but raised target price to Rs 2,450 from Rs 2,400.
"Margin was beat in a weak volume quarter, but is unlikely to be sustained in second half of FY20," the global brokerage said.
"Growth outlook clouded by BS-VI transition which may commence in November. It is early to call this a recovery," it added.
The country's largest two-wheeler maker on October 23 reported a 10.5 percent YoY fall in September quarter profit at Rs 874 crore (though supported by lower tax expenses). The revenue of the company declined 17 percent to Rs 7,570 crore compared to the year-ago period as volumes dropped more than 20 percent during the quarter.
Its operating profit margin contracted 70bps YoY to 14.5 percent in the quarter ended September 2019, which was better-than-expectations of 13.6 percent.
Realisations were strong and better-than-expected in Q2, rising 5 percent YoY to Rs 44,755 per unit on price hikes and higher share of spare parts.
CLSA retained its sell call on the stock with a target at Rs 2,500 per share as valuations were not cheap either.
"Hero saw some demand improvement, but there could be more regulatory pressures going ahead. Even upcoming emission norms will pose more industry headwinds going ahead," the brokerage said, adding Q2 EBITDA dropped 20 percent YoY but was 8 percent above its estimates.
According to CLSA, the margin is unlikely to improve further with BS6 costs around the corner.
Macquarie maintained its neutral rating on the stock with a target at Rs 2,550 per share.
"Despite lower sales, Hero's EBITDA margin remained stable. Hence we raised FY20-22 EPS estimates by 2-4 percent, but BS-6 transition and inventory overhang will pose challenges," it said.
The stock was quoting at Rs 2,673.30, down Rs 38.95, or 1.44 percent on the BSE at 1110 hours IST.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.